Tax Cuts Essay Example | Topics and Well Written Essays - 500 words - 1

Tax Cuts - Essay Example Using the economic terms tackled in class, ways in which tax cuts could help revive the U.S. economy will be thoroughly explained. The concept of aggregate supply and demand allows us to have a better understanding of macroeconomic condition and the impact of implementing government decisions through fiscal policy. Specifically under the supply-side of economics, it is believed that implementing a significant increase in taxes could affect the entire economy by reducing the possible trading practices among the economic participants within a nation. Because of the sudden increase in government tax collection, the local people will be left with little money to spend on basic consumer goods. As a result of decreased trading practices between the people and businesses, potential investors are discouraged from investing more money. Therefore, reviving the U.S. economy through increased in government tax collection is not possible. In times of serious economic crisis, implementing a temporary tax cut through the use of a fiscal policy will empower the people to have more money to spend on basic commodities. This particular economic strategy is effective in terms of increasing the aggregate demand for locally made goods and services. Even though the country is going through a serious economic condition, the fact that people are encouraged to continuously spend their savings to purchase locally made goods and services will somehow improve the overall economic situation. Rather than borrowing large amount of money from international sources, implementing tax cuts is not a bad choice since the government will still be able to collect huge amount of tax collection from the business sectors. Basically, the tax multiplier effects of implementing tax cuts is the key behind enabling a country revive a slow growth economic condition. In the long run, there is a stronger possibility that the economic condition of a country will gradually recover from a poor